There’s a number of potential deductions and credits that can be used to your advantage when filing your taxes. There’s the possibility that some people may have overlooked some of these deductions in the past. As we highlight a few of the more broadly available deductions and credits, keep in mind that they’re sometimes are tailored to specific circumstances and may not be applicable, but can still be worth taking a look.
State Sales Taxes and State Income Taxes
As noted by Kiplinger, filers are given the choice to deduct either state sales taxes that they’ve paid or state income taxes that they’ve paid (not both), as well as state and local property taxes. These deductions tend to be location-sensitive; if you live in a state that doesn’t have an income tax it would obviously make sense to take advantage of the deduction for sales taxes paid, and vice versa. While it’s now known that with recent passage of the Tax Cuts and Jobs Act there will be a $10,000 limit on state individual income, sales and property tax deductions next year, reviewing possible state income tax and state sales tax deductions can still be valuable for the 2017 tax year.
Charitable Contribution Expenses
Most people remember to include their charitable donations made throughout the year. However, sometimes taxpayers forget to include the smaller expenses related to these contributions. As TurboTax points out, there are numerous charity-related expenses that can be deducted: “Ingredients for casseroles you regularly prepare for a nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser count as a charitable contribution. If you drove your car for charity in 2017, remember to deduct 14 cents per mile.”
Childcare expenses are a popular tax break in the form of a credit rather than a deduction. The maximum is $3,000 for one dependent, or $6,000 for one or more. TurboTax notes that this credit is sometimes overlooked by families who have a work reimbursement account that covers child care expenses.
Earned Income Tax Credit (EITC)
This is another popular tax credit that is typically claimed by lower-income individuals and families; while this credit is common, many people are not aware that they may qualify to claim this credit, or they avoid claiming due to the credit’s potential complexity. This credit is largely specific to low-to-moderate income workers but it’s not always limited to this demographic. According to TurboTax, this credit can be utilized by those who experienced a reduction in wages or hours, or a job loss. TurboTax also notes that “moreover, if you were eligible to claim the credit in the past but didn’t, you can file any time during the year to claim an EITC refund for up to three previous tax years.”
Changes to some popular deductions & credits
The majority of the following key tax changes don’t apply to the 2017 tax year, but are important to keep in mind for the future:
- Standard deduction and child tax credit- The standard deduction will see a massive increase, from $6,350 in 2017 to $12,000 in 2018 for single filers, and from $12,700 in 2017 to $24,000 in 2018 for married couples who file jointly. The $1,000 tax credit for each child will be $2,000 in 2018, with the refundable portion of the credit rising to $1,400.
- Personal exemption- While the standard deduction will skyrocket, the $4,050 personal exemption will be no more.
- Tax rates- Earlier versions of the Tax Cuts and Jobs Act aimed for reducing the number of tax brackets. The number of brackets remain the same for 2018, but there are some notable changes illustrated in the table below:
Taxation is among our country’s most puzzling systems, with millions of people focusing a great deal of their time and energy on understanding its complexities. Regardless of reforms, laws and the tax year, taxpayers can make the most of their filings by speaking with a trusted expert who can help navigate the tax strategies that are best for their situation.